Throwing Away the Real Power of the Gig Economy

California just passed legislation that will remake the “gig” economy. Uber is the most direct target of the new regulations which will force the company to make drivers full-time employees, increasing pay and benefits (they are contractors today). The goal is a noble one: to create more stability and living wage opportunities for workers.

I do not think this is the way to do it. And, my prediction is that once the law is in effect Uber drivers will agree. 

There is little doubt that making a good living driving Uber is virtually impossible today—especially in a state like California where living costs are out of control. Despite the fact that hundreds of thousands have signed up to drive, many claim this is an example of big companies exploiting the little guy. But in the same state, starting software engineers are making six figures. These employees, like Uber drivers, have no union and are also negotiating employment terms with the biggest of the big—Google, Apple, and Facebook. But no one would claim these engineers are being exploited.

What’s the difference? Skills.

The simple fact is the job of driving a car is a low skill job. And with digital maps and increasing automation, it has required even less skill over time. The market pays for in-demand skills. There is literally no way to make driving an Uber a high skill, high paying job. There is no promotion path and little way to get more productivity from your time. Not even tenure and experience adds to your output. As the labor market tightens the wages could increase slightly, but given the low skill nature of the job, driver supply will come back quickly as the economy cools.

The only way to make Uber driving a great job is to regulate it as such—exactly the intent of the law. But, like all regulations, there are real trade-offs. Increased labor costs mean higher ride costs. As rideshare prices increase, demand will surely decrease and fewer drivers will be required to meet customer demand. Higher prices also hurt the most vulnerable who face increased transportation costs. The endgame could get us right back to the taxi system. 

But, most importantly, employee status will ensure less flexibility for drivers. They will now need to commit to work for one company (80% of current rideshare drivers work for multiple companies). Drivers will also need to make greater commitments on hours, turning the job into a shift model (anyone can sign on and off as a driver at any time today). 

And that’s the rub. The gig economy is also the “side hustle” economy. These jobs fill gaps—usually in pursuit of something bigger. For most people, it is not intended as a career but a step on the job path or an option to help temporarily. Going to school and need to pay rent? In between jobs? Changing your career and need to subsidize income for a while? Helping a spouse during a hard time? Uber fills these roles in a way no job ever has. What other job in history has allowed you to get hired instantly with no training and allows you to work as much or as little as you want 24-7? 

uber ad.jpg

We should view these jobs as enablers to helping people on their path to building job skills (the only real path to meaningful income and wealth creation). Clearly most drivers use it this way already. Only 20-25% get “all or almost all of their income” from driving. But, let’s not pretend that there is a big career here for these folks. Let’s work on real policies to create better long term jobs for them. Why not subsidize more training so they can build a career path? How about a tax credit for taking a second job outside of Uber or Lyft—or earning a degree or trade certification? And if you want to get Uber to pay more, pressure them to build training programs and outplacement services for their drivers. On point, just today, Uber announced job boards for work outside their driving pool

The California law is looking to do one thing—make it so full-time Uber drivers can make a good, stable wage. While noble, it helps the few and hurts the many. The unintended consequence will make skill development a lot harder for this majority who use Uber driving as a stepping stone and gap filler. In a recent poll, 79% of Uber drivers said they want to remain contractors. They love the total freedom and flexibility. Of course, they want more pay—but they can’t get it without major trade-offs. While activists cheered a big victory for workers when the bill passed, expect a revolt from drivers when the law becomes a reality.

We have to start dealing with the root cause of wage stagnation in our economy. Building more paths to skill development is the key. In no way am I suggesting we will turn every person into a coder or entrepreneur. But, jobs in retail, construction, manufacturing, healthcare and many more industries all present real training and a path of upward mobility. Driving an Uber does not. How do we design policies that encourage getting on these paths? How do we make it easier to get access to training, education, and jobs? How do we re-orient our education system to the skills in demand? These are the hard questions we have to answer. Policies that feel good but undermine the need to solve the real issues will only make things worse.

Good Reads - Early October

  1. I love Arnold Kling’s short book The Three Languages of Politics. Russ Roberts does a nice review and adds his own 3 blindspots for the major political traditions—liberal, conservative and libertarian.

  2. Nina Teicholz breaks down the new report on beef and health…and the issues with most food studies.

  3. Women are crushing men in college achievement. Can’t help but think the long term impacts of this will be profound.

  4. More ethanol, more corn, more lunacy. A once good intention of the environmental movement has turned out to be an entrenched ill for the sake of politics.

  5. Where are we located in the Milky Way? Always shocking when reminded: our galaxy is one of hundreds of billions…and alone over 100,000 light years wide.

  6. Great overview of Peter Thiel, Rene Girard and Mimetic Theory. “Imitation draws people together. Then, it pulls them apart like an ocean riptide.”

Are Carbon Emissions a Red Herring?

Global warming is most often framed as inevitable unless we can solve one problem: reducing carbon emissions from fossil fuel use.

But, despite more than two decades of attention, emissions have only continued to increase. Part of the issue is we have not been able to embed scalable, cheap clean energy alternatives deeply into our global economy. All the while, China, India, and Africa want the same standard of living as the Western World—and that increases demand. Almost a billion people don’t have access to clean water; 2.5 billion lack access to modern sewage and 5 billion don’t have air conditioning (more need it every day!). These are energy problems and the developing world is as entitled to this standard of living as we are in the western world. We want more energy for all—it is the right thing to do. The dilemma is how to achieve this progress as the planet continues to warm.

CO2 Emissions.png

Our climate debates, when not distracted by denialists, end up about this massive trade-off: slow progress (hurt the poor) or destroy the planet (hurt mostly the poor). Yes, this will enrage hardened climate activists. They see the promise of clean energy and all the new jobs and opportunities that come with it. So do I. But, it likely won’t happen fast enough. And any increase in the price of energy along the way (e.g. carbon taxes which incent real innovation) will hit the poor twice as hard as the rich given the energy intensity of basic living

Regardless, even as clean energy comes online, the installed base of power will continue to emit. If 100% of all cars sold today were electric, it would take decades to have an all-electric transportation system (not to mention a 100% renewable grid that powers them). I am all for pushing clean energy technologies aggressively. Even without a climate crisis, cheaper, non-polluting energy would be a generational innovation bringing health and security to billions. We should invest like mad.

But, how can we reframe the climate problem away from this massive trade off? 

There is another side of the equation we just don’t talk about. Carbon can be removed from the air. And, we don’t need fancy (and expensive) sequestration technologies for this reversal. Nature does it every day—in gargantuan amounts. Humans emit 37 gigatons a year of carbon using fossil fuels. Nature consumes ~750 gigatons a year! Yes, 20 times the amount we emit is consumed by the natural world via the magic of photosynthesis. Of course, nature gives most of it back—roughly 730 gigatons through natural processes. 

But given these facts, which is easier:

  1. Reduce 100% of human emissions by totally transforming the most important industry on earth?

  2. Help nature get 2% better at consuming and holding carbon?

My money is on #2. There is just too much evidence #1 will take too long and face too much resistance on both sides (“No nukes!” “I want my v8 pickup!”).

And the good news is we are finally understanding the powerful ways we can harness nature to consume carbon. Consider the following:

  1. Soil health. I wrote a post on regenerative farming and the trend is starting to get wider coverage. Reducing tillage and chemical use, increasing holistic grazing (yes, cows!), planting cover crops, ensuring species rotation—many of these ideas are easy to implement to reinvigorate our soil so that it consumes and holds carbon.  The holding capacity of the soil is massive—and with proper management, it truly could be a climate (and diet!) breakthrough. Consumers can help by demanding food raised using these regenerative techniques - with demand the farmers will change.

  2. Genetically modified plants and trees. By studying plants that consume more carbon and store it more efficiently, we can help create more of them—and modify other plants to do more of it. Many biologists are working the problem - and the signs are encouraging. Just as we have bred animals to grow more meat and crops to deliver more yield, we can help plants have bigger and deeper root systems to consume and hold more carbon.

  3. Reforestation. Rainforests, coastal mangroves, grasslands, and other natural ecosystems are massive carbon sinks. While the burning of the Amazon suggests no progress on this front, huge opportunities remain to restore massive ecosystems every bit as powerful at consuming carbon—from the Great Plains grasslands to massive coastal ecosystems to our own overgrown pine forests

These are just a few ideas—many more are emerging as we get closer to fully understanding the complex plant ecosystems of our planet. Many of them also look a whole lot cheaper than reworking our economy on an expedited timeline.


I am not suggesting we give up on emissions and our clean energy future. But, why aren’t we just as obsessed with the carbon removal part of the equation? We have 15 trillion dollar plans to limit emissions but no real focus on reversing our bad habits.

My guess is the reasons for this neglect are two-fold. One, it is much harder to measure the impacts of natural sequestration. Taking a coal plant offline and replacing it with solar panels is easy to measure and gives fast gratification. Improving soil organic matter is much harder to track and understand. Two, there is a political need to force our fossil fuel companies and other polluters to face real consequences. If we get good at storing carbon, won’t they just have license to pollute even more? Perhaps, but the economics of solar, wind and other technologies will surely be irresistible over time. We just need to get there.

Until then, we can buy time by removing carbon from the air—naturally. More energy for the world is actually the just thing to do. Finding every way to spread prosperity AND save the planet is the imperative. Nature itself holds some key answers if we will just embrace it.

Good Reads - Early September

  1. Rory Sutherland explains that free markets work because they are NOT efficient. Variation, failure and luck drive the breakthroughs.

  2. The case for defusing political arrogance—and ideas on how to do it. Moral certainty on all things political is a bipartisan disease for sure.

  3. The right harps on government waste (often correct), but always demand more for the military. Ask anyone in the service and they will point to massive waste, but the F-35 tops them all—$1.5 trillion.

  4. Top college majors in 2019 and trends from the past. Computers and business rule.

  5. I admit I like Malcolm Gladwell’s stories and theories…but check the data.

  6. In the things I worry about camp (but no one is talking about), we are selling way too many arms to way too many people—and they end up in strange places. It’s a terrible economic plan (but easy), and I fear will catch up to us, our allies, and enemies.

Bipartisan Gloom and the Parrots of 2020

“When the Eagles are silent, the Parrots begin to chatter.” Winston Churchill

 Transformative leaders inspire people to a bigger, better future. They unite even through the darkest times. They are rare.


America has seen a number of examples of this type of leadership and they often emerge when we need them most. FDR gave America the confidence that it could work itself out of the Depression and fight its way to beating Hitler. Reagan made America believe it could rise from a period of massive stagnation and international embarrassment to lead again—in economic innovation and world affairs. Both not only sold the vision but they delivered, and as a result their core governing philosophies emerged as policy foundations for 40 years.

FDR and Reagan built broad political coalitions out of a positive vision for America and the world. They were viscerally optimistic and made large majorities believe our best days were ahead. And, we followed their lead.

Americans once again feel we are on the wrong track. Despite a robust economy and record low unemployment, 66% of Americans are unhappy with the direction of the country and 87% are worried our leaders are not up to the challenge. And, we face big ones—rising education and healthcare costs, a nuclear Iran and North Korea, high inequality, huge debt, a warming planet and much more.

The roots of our anxiety are grounded in the enormous rate of change in our economy. Globalization and the Internet have made the skills of the average American worker less valuable and driven broad-based insecurity. Yet, leaders on the left and the right do little to address this enormous change, instead rehashing well-worn ideas from a previous time: Unions! Lower taxes! 

But, worse, our current leaders reflect back all our fears. They feed on our anxiety and motivate with anger and bitterness. This is the core of populist movements. Leaders parroting back our anxiety and appeasing it with reactionary answers that can win elections but tend to disappoint when it comes to governing. In the absence of a positive vision for the future, fear and anger is a great motivator.

The battle for 2020 looks to be a contest of dueling parrots reflecting visions of a dystopian future, a zero-sum perspective for a world gone wrong.

On the right, it is the old, cynical standby: xenophobia. China and Mexico took your jobs with cheap labor—or worse, by immigrating to your hometown. It’s them or you. If they win, you lose. We will protect you with tariffs, new trade deals and anti-immigration policies.

On the left, it’s also a stark choice—everyday people or the wealthy and powerful. The economy is rigged and the rich are taking from you. It’s them or you. And we will ensure you get the share they took from you by taxing them to pay for healthcare, education, housing and more—no strings attached.

No wonder America is cynical. Despite there being some merit in both perspectives, these prescriptions at their extremes are divisive and emotional with aspects of racism, paternalism and bitter class warfare. And, meanwhile, nothing is getting done.

We are being sold a Mad Max version of the future, a bitter battle for resources at the end of times.

Where is our Eagle? Who can show us the way that inspires—that gives us hope that a better future still awaits us?

Yes, inequality is reaching new highs, but the wealthy are showing strong eagerness to chip in for good solutions.

Yes, the planet is warming, but renewable energy is now cheaper than coal.

Yes, healthcare costs are rising, but many in the world have  figured out how to do it cheaper and better.

Yes, legacy skills are being devalued, but new jobs are emerging that can fill the void (and can’t be outsourced).

I am not suggesting there are easy answers to these complex problems, and some real sacrifices will be required. But, we need leaders who sell ideas as achievable in non-zero-sum terms. Leaders with a belief that the future will be categorically better not just carved up differently. We need answers that embrace abundance and innovation with broad based advances—even if never fully realized. Americans will indeed make sacrifices if they believe in the path to a better future - and they want to believe.

There are voices of optimism in our midst—Michael Bennet, Amy Klobuchar and John Hickenlooper to name a few—but so far they have gained little traction. Their unifying message is met with the scorn of partisan true believers warning of compromise.

Why is pessimism selling? Ironically, it could be that things are not bad enough. The malaise is too moderate. The challenges just a bit too removed from existential crisis so we can narrow the fight for our own piece of the pie. We have not had to fully face the scope of the changes facing us to present systemic, new, but optimistic ideas that galvanize a large majority. Or perhaps it is just the inevitable response to having a bully in the top job—you need a bully to take him down.

But, the day is coming where unity fueled by an optimistic vision will be required to make the needed change. Our economy will inevitably falter. Our debts will come due.

I remain optimistic an Eagle will emerge.

Good Reads - Mid July 2019

  1. Relevant to my post this week, a good profile on the great optimist Julian Simon who won perhaps the most famous wager of all time and proved that “human imagination is the ultimate renewable resource.”

  2. Great set of comments on the coming end of oil and the electrification of the economy.

  3. I have been learning a lot about retail and the mammoth essay What is Amazon? is hard to beat. Outlines the incredible rise of Amazon and describes their potential downfall. For business junkies.

  4. Brutal, over-the-top and profane takedown of how school is not evolving to the modern economy. “Technology is advancing at breakneck speed and you’ve got us sitting in grandpa’s iron school desk drilling flashcards on an iPad.”

  5. The case for being a medical conservative (i.e. less aggressive in treatment). And a comprehensive takedown of stents—one of the most common surgeries in America.

  6. Who kills more animals, meat eaters or vegans? It’s not as straightforward as you think.

Saving the Poor or Saving Notre Dame, or the Curse of Wicked Problems

Recently, the age of outrage took aim at large donors stepping up to help restore Notre Dame.

Part of this anger was fueled by the disbelief at the billionaire class being able to come up with hundreds of millions of dollars at a moment’s notice. The enormous wealth created in the current era just blows our collective mind (as it should). Any chance to rant against the enormous inequality stemming from these massive fortunes can’t be passed up. Even my 14-year-old daughter thought the donations were frivolous, tone deaf, and misdirected during these times. I disagree for a couple of reasons.

notre dame fire.jpg

First, and most obviously, Notre Dame is worth restoring. It is one of the rarest treasures of architecture and human achievement. Regardless of your religion, few humans can stand next to it and not be overwhelmed with an inspiring sense of human potential. Art is often viewed as frivolous, but it is a physical expression of our deepest emotions—faith, love, joy. The presence of monuments like Notre Dame contribute to the experience of being human that is impossible to capture in pure economic statistics. We can’t measure its value and impact, but we know it is there.

Of course, the argument against these donations is not that Notre Dame has little value, but simply there are better causes deserving the dollars. If we can spend the same dollars to save human life, ease suffering, or restore the climate, it should be an easy trade, right? But, giving to these issues differs from giving to Notre Dame in one massive respect: it usually doesn’t work. All of the big issues of our time—how to develop valuable skills in mass, how to end poverty, how to reduce environmental degradation—are classic “wicked” problems: hard to define, complex in cause, contextually and culturally dependent, and unfortunately, riddled with landmines of unintended consequences in trying to solve them.

In 2017 alone, over $400 billion was given to charity in the U.S. Take out gifts to religious groups (much of which do go to poverty) and still more than $250 billion went to philanthropy. And the wicked problems received the bulk of those dollars—$60 billion to education, $50 billion to human services, $30 billion to public-society benefit, and almost $12 billion to environmental causes. That is a ton of money and the vast majority is coming from individuals— the same ones giving to Notre Dame.

What did we get for these huge outlays? Well, I am sure there are plenty of stories of success, but the core problems remain intractable:

Poverty in the US remains stuck at 12%—roughly where it has been for three decades.

U.S. education performance continues to drop—now 38th in the world.

Our carbon emissions have dropped some, but remain massive.

Chronic disease (diabetes primarily) and obesity are now at all time highs.

And while you might argue the poor results stem from a government reduction in spending on these items, you would be wrong.

Bill Gates recently admitted of his work on public education: “we haven’t seen a big difference even after 20 years, but we’ll keep going.” My hunch is you could get the same frustration from anyone who has devoted their lives to any of these issues. But, we must keep trying. I am in favor of a more small-bet, innovation-focused style of philanthropic investing, but any and all forms of trying to crack these wicked problems are valuable and needed.

“Kind” problems present in a very different way—they are definable, contained and predictably solvable with simple money or effort. Providing turkeys to the needy at Thanksgiving, funding solar projects, endowing scholarships...or rebuilding a landmark church are all examples. These gifts tend to tackle symptoms rather than root causes but they have a direct, definable impact. But, just because they are kind doesn’t mean they don’t matter. The spirit of giving is contagious and seeing some success leads to bigger generosity.

This is surely one reason why so many donors felt compelled to donate to rebuilding Notre Dame—they know it will work, unlike the “wicked” problems they tend to support. Give money, restoration happens. Support for these “kind” problems can build momentum and support for the “wicked” problems. The tangible impact provides hope and conviction that it is possible to make a difference with philanthropy. Small victories demand bigger challenges. At worst, we get to keep Notre Dame for a few more generations. Either way, I am going to reserve my outrage for another day.

Good Reads - Mid June 2019

  1. “There is actually no such thing as atheism. Everybody worships. The only choice we get is what to worship.” David Foster Wallace’s timeless speech. Sure wish he was still around to comment on today’s world.

  2. A very different (and entertaining) way to look at income statistics from Russ Roberts. Did the rich get richer? Yes, but it doesn’t mean quite what you think.

  3. Everyone’s down on Tesla….here is the bull case. #1 luxury car maker. #1 in self driving tech. #1 in battery tech.

  4. Europe regulated privacy on the Internet (GDPR). Early returns are poor. It has helped the big players and done nothing for real privacy.

  5. Looks like the California to Texas migration continues. Eventually this will cause real political turmoil in CA (and make TX truly purple).

  6. Tyler Cowen offers some perspective on the panic surrounding internet privacy. “Gossip is an age-old problem, and still today many of the biggest privacy harms come through very traditional channels.”

Monsanto and the Coming Regenerative Food Revolution

Monsanto, the giant farming chemical company, is headed for a lifetime of lawsuits over its weed killer RoundUp. This story is just the first in many that will reveal the rot of our agricultural system. As a result, our food system and environment are about to get a massive makeover that could be the biggest story of the next decade.

First, a little history.

As America moved West in the 19th century, settlers found bountiful grasslands populated with up to 50 million buffalo and vast herds of other wildlife.

By the 1930s, much of the best grassland had been cleared for crops and plowed relentlessly. Eliminating buffalo, removing grasses and plowing over 100 million acres led to the massive loss of topsoil in the horrific Dust Bowl. Often thought as a weather tragedy, the Dust Bowl was a man-made environmental disaster caused by poor farming techniques and soil tilling. It left the food supply vulnerable as America was trying to get out of the Great Depression.

dust bowl.jpg

But, this environmental tragedy and humanitarian crisis led to new innovations in food technology. The so-called “Green Revolution” of the 1950s and 60s was the start of a massive change in agricultural technology. Fertilizers, pesticides, antibiotics, high yield seeds, and other technologies caused crop productivity to rise dramatically despite weakened soil. Chemicals and engineering filled the void of nature and the world was fed in abundance as costs dropped. The techniques also spread globally, feeding the rising populations of India, China, and Africa.

But, the Green Revolution had a major flaw. It tackled the symptom (low yields) not the cause (soil destruction) of the food crisis. The negative implications to our food, health and environment have been profound.

We built an industrial food system based on high-density mono-cultures requiring ever-increasing use of chemicals to make up for low-nutrient soil.

These chemicals run off the land, poisoning our streams, water table, and oceans. Bird, insect, and other animal populations have collapsed in the process.


We have an oversupply of soybean and corn, driving sugar consumption and now, diabetes rates, through the roof.

We have a $10 billion per year Farm Bill, that pays for the chemicals, reinforces bad practices, and harms the small time farmer. These subsidies hide the real cost of our cheap grains and sugar.

We now have an antibiotic resistance crisis caused by indiscriminate use in our animal population.

And, of course, cancer. It’s always hard to isolate causes of complex diseases, but if you don’t think 300 million pounds of chemicals per year (in the US) could cause some harm, well, it just defies belief.

This madness must end. But, in the last 10 years, it has just ramped up. Monsanto doesn’t just sell RoundUp to kill weeds; it also now sells genetically modified “Roundup Ready” seeds to ensure no crop harm from the increasing amounts of chemicals needed to fend off resistant bugs and disease. The race is on for new chemicals, new breeds, new antibiotics. And the path of destruction widens.

But, a radically better alternative is also emerging and starting to gain traction. It involves harnessing nature and finally addressing the root cause of the issue - damaged soil. This alternative will allow us to heal our damaged soil and grow natural food (yes, in plentiful quantities) by harnessing the natural ecosystem of the land.

The most common name for this movement is regenerative agriculture. Regenerative agriculture harnesses nature to maintain output; it focuses on increasing biodiversity in a way that allows nature to do all the hard work. The shift is in direct opposition to our current beliefs and policies. It involves removing our monoculture super farms (instead rotating crops for diversity and soil health), using cover crops and ruminants (yes, cows) to rebuild soils and grasses, and breeding for natural results (versus poison resistance). The results involve no chemicals or antibiotics, just healthier food and a healthier environment—including nutrient-rich soil that sequesters more carbon. Finally, it gives the small farmer a role to play as it requires less capital and lower operating costs. If you want to read a full, well-thought-out case, read this great piece by Nick Jeffries.


Regenerative agriculture uses science to understand and harness the environment—not just develop ways to deal with the abuse of it. The movement is in its early days and scaling it will require huge shifts in our education system, our policies, and customer demand. Five billion dollars of RoundUp sales will keep a lobbying machine going for a long time to perpetuate current methods. But, perhaps Monsanto will use the time to turn their focus to powering this new paradigm. They are facing the truth of a better approach regardless. For the sake of our health, environment, and economy—we all need to embrace it.

Good Reads - Mid May 2019

  1. A 90-second optimistic video on the roots of our deep partisanship. In short, it has happened before and is part of our collective sorting of new issues in a changing world.

  2. Plants absorb 20x the carbon humans emit (yes, they return most of it). Sounds like a good place to look for small changes to make a big impact on global warming.

  3. Why are eggs good for you…then bad for you? Because observational food studies are highly unreliable. And the press leaps on statistically irrelevant results.

  4. Essential read on a totally new approach to helping those in poverty. In short most of what we are doing is wrong (and clearly not working).

  5. Excited about a new highway widening project near you? Don’t be - it won’t work (at least not for long).

  6. How a professional gambler hacked Jeopardy. $1.7m of winnings in 22 days! It’s all about the Daily Doubles.

Healthcare is Eating the World

By far the biggest issue in America is healthcare. Whatever your cause, you need to help fix healthcare first.

Two charts make this case hard to refute.

Source: Kaiser Family Foundation analysis of Truven Health Analytics MarketScan Commercial Claims and Encounters Database, 2005-2015; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 2005-2015 (April to April)

Source: Kaiser Family Foundation analysis of Truven Health Analytics MarketScan Commercial Claims and Encounters Database, 2005-2015; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 2005-2015 (April to April)

We always hear about wage stagnation, but wages are actually rising—the gains are just getting eaten up in healthcare benefits which do not show up as wages. Worker and employer costs are rising rapidly for health benefits. And even when workers end up earning more in spending power, much of it goes to healthcare in the form of deductibles and other costs.

An entry-level employee in my business ends with 20% of their salary going to health costs (more if they have a family). So if health costs rise 10% (not an unusual increase in recent history), a 2% rise in salary is 100% eaten up by health benefits. And, with healthcare results not increasing, all these increase in costs come with no real benefit.

And our government? Well, they too are swamped covering healthcare. It is overtaking every other expense with no end in sight. We are headed to 30%+ of our budget being eaten by healthcare and these numbers only include direct healthcare programs, not the costs eaten up inside other big programs whether the military, research investments or education expenditures.

Source: Congressional Budget Office, CRFB extrapolations

Source: Congressional Budget Office, CRFB extrapolations

So, people who are working hard and succeeding feel no better off. And the government, which has big problems to solve—education, transportation, R&D, climate—has to give all incremental dollars to healthcare. If you care about any other program, from social justice to military intervention, you need healthcare costs to be solved first. There is just not going to be money for your program if we keep on the current track.

Despite facing this reckoning, we are not getting solutions. The left is obsessed with universal coverage. This is a noble end, but like any other new program, we need lower costs to make it viable. The right, well, they are not in the game. Ever since Sarah Palin’s abhorrent (but effective) lie of “death panels” the right has used fear of healthcare reform as a political weapon.  

Costs have to be our obsession. We spend too much—almost 50% more than any other country on a per capita basis.

Source: Kaiser Family Foundation analysis of data from OECD (2017), "OECD Health Data: Health expenditure and financing: Health expenditure indicators", OECD Health Statistics (database)

Source: Kaiser Family Foundation analysis of data from OECD (2017), "OECD Health Data: Health expenditure and financing: Health expenditure indicators", OECD Health Statistics (database)

The only real proposal on the table to lower costs is Medicare for All. Ever since we removed “pre-existing” coverage as a factor in insurance coverage, the real value of insurance companies—assessing risk—has been minimized. Furthermore, Medicare costs are lower on average than private insurance.

But, politically, Medicare for All is not happening. It’s a wholesale overthrow of the current system. It is just not feasible. Our skepticism of government in America is too strong. Doctors are too powerful. And a unified force of special interests will blunt it. As Uwe Reinhardt pointed out, “Every dollar of waste in the healthcare system is a dollar of income for some provider.” They won’t give up easily. Not to mention, universal coverage remains the primary benefit of Medicare for All. Solving the cost issues require deeper thinking.

We need a hardcore push to incrementally get the cost curve bending back. Obamacare actually contemplated some real cost cutting programs—pay for impact, evidence-based payment boards even the healthcare mandate—but failed the final bill or have been weakened since passage. The program fell back on dealing with coverage. Costs were for another day. That day must be now.

To get this done, we need fewer grand plans and more small, wonky ideas that chip away at the problem. With small gains, we will end up in a place where bigger decisions can be made. The left and right have many of these ideas that, in isolation, could pass into law. With a laser focus on lowering costs, each could get things done.

Patent reform on drugs, more pay for service, fewer large hospital and drug mergers, tort reform, testing effectiveness standards, provider licensing reform, behavior-based pricing, cross border insurance plans, patient data standards and portability, giving Medicare negotiating powers, doctor-drug incentive reform, advertisement reform, telemedicine regulations, and many more ideas exist—each of which could make a difference. These are unsexy, technical changes. No one can win office on any one of these tactics, but they can on a total commitment to lower costs and tangible plans to get there.

Americans are going to demand progress on healthcare costs. They are fed up with their income being eaten up and their government held hostage. Each side could deal to get some of their wish list done. But, we need leadership ready to make lower healthcare costs a priority. If it gets done, our options expand. We can then fight over the money we get back and what to do with it—pay debt, fund schools, expand coverage, massive infrastructure investments. Those are the fun debates. But the healthcare overhang will haunt us until we turn the cost tide. Let’s see who steps into this debate with real, doable solutions.

Good Reads - Late April 2019

  1. Warren Buffet has said he would avoid states with huge underfunded pensions since massive taxes are coming. Well here they are (bad news for New Jersey, Illinois and Connecticut - and more).

  2. Steve Ballmer’s public service site USAFacts is good fun click around to find out all about the US - the people, the economy and the government.

  3. Who Killed Lard? Bad science and Crisco! Will it return?

  4. Do most medical treatments work? A great listen on the data (no) and implications.

  5. I have never heard of a small farmer that likes the farm bill. But massive industrial farms love it. The case to kill this $20 billion behemoth.

  6. Bob Lefsetz nails the Mueller Report and this political moment. In short, “we’ve got outrage fatigue.”

A Third Way: Jobs-First Capitalism

“Every underemployed American represents a failure of entrepreneurial imagination. Joblessness is not foreordained, because entrepreneurs can always dream up new ways of making labor productive.” - Edward Glaeser

Populism’s rise in America is well documented—and sadly its momentum is only building. It seemed to hit a peak with President Trump’s ugly declarations against immigrants and globalization. But, it is now emerging strongly on the left with Alexandria Ocasio-Cortez’s assessment of capitalism as “irredeemable.”

Americans are anxious and insecure. They feel the country is on the wrong track. They have low savings. Working class wages are just now rising for the first time in decades. They are turning to drugs and alcohol more than ever. Suicide is at all time highs.

The fear and angst is raw meat for ambitious politicians. People want someone to blame and the parties are ready to oblige. For the GOP the target is the age-old bugaboo—foreigners—immigrants who take jobs and foreign countries that compete with our companies. For the Democrats, the enemy is the rich who are taking too much of the pie, leaving the average American behind.

The general philosophy of each is divisive and laced with defeatism. One says: we can’t compete with the world, so let’s keep them out. The other says: there is no hope for most, so let’s equalize their position with new programs. And neither is sustainable. We can’t keep out competition forever and we can’t spend our way out of problems.

These zero-sum perspectives are exactly what lead Europe to destruction in the 20th century with the rise of fascism and communism. In fact, what helped America transcend these hard times was unifying to defeat totalitarianism. The war effort came at a great cost, but it unified the nation and reignited economic growth. Let’s hope war is not the answer this time as well. So, what possible rallying cry could help unify the country and bring back hope?

We need a better path to unify us and bring hope to everyday people. I propose it is about engaging all Americans in building the future of the country through jobs.

Yes, we live in a competitive world. But, America has the best, most creative talent, the freest system, and the biggest market. We have been a beacon of innovation and freedom for more than a century and our best days are still ahead. And it starts by putting our people to work. Stable jobs with a path for upward mobility. Jobs that allow people to contribute and provide. Jobs that create self-worth and social connections and capital.

Oren Cass’ book, The Once and Future Worker, makes the case that lack of secure and promising work is a key driver of our social discord—depression, suicide, addiction, and polarization. While unemployment is low in the wake of the financial crisis, much of it is temporary work not providing the powerful benefits of collaborative, full-time work. Many are also just opting not to work. For example, in 1967, 5% of prime age men did not worktoday it is 15%. In some places, like Kentucky, more than 70% of non-college-educated men are working. Happiness studies show that unemployment is 10x more damaging than a substantial loss of income alone. And the unemployed have 50% higher divorce rates than the employed. Jobs give self-worth and a foundation for the social capital needed to build a life.

A rising stock market built on protectionist corporatism does not provide these benefits. Nor do more handouts. But, jobs-first capitalism would demand solutions. If our goal became rising employment for all, we could give more Americans the opportunity for a better life. And, if we want to compete in the emerging global economy we will need everyone to contribute. Our nation and our communities will get stronger.


Capitalism must remain the heart of our system. But, making employment (not just the rate, but total employment and median earnings) the core goal would drive real policy changes. It would challenge the orthodoxies of both parties and drive the emergence of new, creative programs.

Some ideas in this vein:

  1. Higher Minimum wage via Earned Income Tax Credits (EITC) A mandated wage raises labor costs, discouraging hiring and encouraging labor-saving automation (think McDonalds’ ordering kiosks). Subsidizing low wages via tax credits would result in the same bump in pay but encourage hiring. Making these programs more generous and paid out like a paycheck would have large impacts—and they could be targeted to high impact industries.

  2. Means-tested payroll taxes Let’s give a break for the entry-level earner (for both employee and employer) and raise the cut-off for higher earners. Again, this income boost at the low end will increase incentives to create jobs and for those on the sidelines to take them.

  3. Massive R&D investments America needs its next major platform for growth (cars, telephony, television, internet are a few from our past). Expand NIH, DARPA, and other effective basic research investments to increase the chance of a new platform and employ the best minds here in America to pursue it. Create strong tax incentives for private R&D to do the same.

  4. Revamp of Antitrust law More competition drives more jobs. We need to update our view of market power beyond pricing harm to the consumer.  

  5. A massive review of crony regulation Regulation is highly misunderstood. Most of it is not about keeping factories from dumping sludge in rivers. It is about protecting winners through high-cost barriers to entry (see Tesla trying to sellor servicetheir cars against entrenched car dealers). These rules protect incumbents and large companies. This is the swamp that actually needs draining.

  6. Legal limits to non-competes and job clubs Let people switch jobs easily and enter professions. This one includes a big review of licensing and accreditations which keep people out of work.

  7. Massive infrastructure investments including YIMBY provisions A big stimulus will clear a backload of projects and create jobs. But we also must allow new private projects to move forward quickly through layers of approvals. Not just rail, highways and tunnels but also new building and development. Housing costs are eating into anyone’s ability to earn a living.

  8. Drive opportunity and hope without college The push for college for all has failed. It has resulted in too much debt and removed a pipeline of skilled technicians. Let’s create other paths. The government funds traditional college 100x the rate it does skills-based education. Let’s go back to tracking willing kids into technical work focused on actual trades.  These are good jobs and still create a path to a career with real upside.

This is only a small sample of jobs-first ideas. But, it shows the kinds of programs that emerge when jobs are the north star. We have to apply the same filter to bigger problems, like immigration and healthcare. We will get different, better answers with job creation as the frame.

Many of these ideas will distress both the GOP and Democrats. Taxes will need to be raised to fund these efforts. But some social programs will need to be cut as well—not just for funds, but to ensure the right incentives to take the jobs created. Jobs-first capitalism combines the self-reliance of traditional conservatism with the helping hand of liberal government activism. It seeks economic growth via a boost to those on the sidelines. In the end, it is about giving more people an opportunity for a better life - and growing the pie together. That is the original American Dream. We need it back.

Good Reads - Late March 2019

  1. Daniel Kahneman lays out why we don’t want to be happy, we want to be satisfied—and helps explain why social media makes us miserable.

  2. Why calories are all wrong. I still think the best (short and practical) read on the science of sugar and fats (and exercise) is Art De Vaney’s early book on the subject.

  3. Democratic California Gavin Newsom can’t get environmentalists on his side for controlling fires. Yes, it involves doing what nature used to do—controlled burning.

  4. Saudi Arabia’s “reformer” (and murderous) Crown Prince has a real problem—a terrible economy and little way out.

  5. Coleman Hughes on the ill-conceived but well-intentioned idea of reparations.

  6. Scott Sumner on the sins of the modern left and right in America. A good lead in to my piece this week.

We Need More Seed Philanthropy

Think small, get big. Think big, get small.” Herb Kelleher

In 2018, after 7 years and $600m spent, the Intensive Partnership for Effective Teaching declared failure. The non-profit effort designed to measure and manage teacher success was backed by the biggest minds and wallets (including Bill Gates) and mounds of research projecting its success. It was the latest in a string of efforts in education that had underwhelmed despite massive conviction—and resources.

In 2009, the same year the Intensive Partnership started, a young hedge fund analyst named Salman Khan quit his job to publish and manage a site devoted to tutoring videos he had created to help his young cousin in school. He was backed by one small donor. In 2016, Khan Academy was serving over 12 million students per month in 30 languages. The Gates foundation is now a major backer.

Like many successes, the rise of Khan Academy was organic and unexpected. Its emergence came from a real-world problem, solved in a small way that just grew and grew as others saw value. It started small and scaled one user at a time—not based on a massive donation. No foundation was behind it —just a little seed money and a lot of time from a committed founder. This is how success happens in the for-profit world every day. The non-profit world surely needs more of it.

salman khan.jpg

In the last decade, the movement of Effective Altruism has raised the bar for donors to scrutinize their gifts and prioritize those with the biggest measured impact. Inspired by the work of Peter Singer, the new class of mega donors (lead by the Gates Foundation) have set up large organizations to study projects to ensure maximum positive impact on the dollars going out the door. Problems are heavily researched and fundable solutions examined by subject matter experts (at least those with big resumés and experience in the chosen field). The question is would these organizations ever have backed Salman Khan in the early days? Well, they didn’t.

Effective altruism is at its best when it attacks clear misallocations—like major gifts to already mega-rich universities. Malcolm Gladwell famously ridiculed hedge fund manager John Paulson’s large gift saying: “If billionaires don’t step up, Harvard could be down to its last $30 billion.” There are arguments for these gifts (research and development, etc.) but it’s hard to debate ego-building isn’t a primary driver.

But Effective Altruism is a lot less helpful when it comes to giving for the purpose of solving complex issues—poverty, disease, racial achievement gaps, education, global warming. The movement proposes a cold hard rational view of impact and raises the bar on giving to solutions backed by evidence. But, these are complex, intractable problems for a reason—there are no easy answers. Money alone is absolutely not the issue. Yet, mega charities need solutions for their massive endowments. So when they see a bit of success—they pounce, pouring millions into scaling—just as happened with the Intensive Partnership. They have billions to spend after all. They want to play big and play fast to change the world. But failures often follow. The desire to get massive, fast impact is noble—but usually unsuccessful.

The problem with innovative ideas is they only look obvious in hindsight. Sam Altman of YC says, “Great ideas are fragile. They are easy to kill.” Big companies are terrible at innovation for just this reason. Big companies need big ideas. And big ideas need big budgets. And big budgets need great oversight. So safe, logical ideas in obvious opportunities get the funds and often get micromanaged to death. Consider the Zune iPod killer at Microsoft, rideshare at Ford, social networking at Google or countless other examples of massive enterprise innovation efforts.

Real innovation in business almost always arises from the highly inefficient venture community and the naive but optimistic founders they back. It takes hundreds of failures for any one big breakthrough. And the vast majority of the winners are unlikely in some obvious way. What makes us think non-profit work is any different?

How do we seed hundreds more Salman Khans? The Effective Altruism movement surely does not encourage more of them. Investment to pursue new and unorthodox ideas will result in too much failure. Luckily Khan had the time and resources to pursue his passion. Many don’t.

There are emerging models to help people with similar passions from the Genius Grants of the MacArthur foundation to Tyler Cowen’s new Emergent Ventures to YCombinator’s move to fund non-profits. We need more. The big foundations should create slices of capital for seed philanthropy. Pools should emerge so small donors can fund a portfolio of ideas.

Many will say this approach will miss big ideas and diminish the ambition so prevalent in foundations like Gates. Khan Academy, after all, is just a tutoring service that has not radically changed education. But big change takes time—and steps. Khan has cracked the code on the power of “one-to-many” teaching. It is a set of shoulders on which others will build. Its lessons will spawn many new ideas. My hunch is all revolutions need these sparks. Successes build over time, they are not born. All for-profit companies work this way. Who would give a startup $100 million on day 1? Seed investors are critical to businesses. When seeds blossom, Series A investors are there to keep them going, then growth capital and public markets. Gates, Bezos and many other large foundations play these big capital roles. But, the seed funds don’t really exist.

The great thing about seed philanthropy as a concept is it levels the playing field. It is daunting for anyone engaged in philanthropy to feel they can make a difference when Gates and Bezos are throwing billions around. As I look to establish my own giving strategies, I am excited to explore these concepts and how to move them forward. Updates to come.

Good Reads - Mid Feb 2019

  1. The always great Charlie Munger on investing, overconfidence, healthcare and more.

  2. The Republican Congress just passed the biggest land conservation bill in decades!

  3. Europe is headed for disaster and the pain will likely start in Italy. This situation could be the trigger to the next recession…and global crisis.

  4. Yes NYC was giving big incentives to the company headed by the world’s richest man. But, the case that it would generate a great return are very compelling.

  5. Unexpected high praise for the Lorena Bobbitt documentary. Might have to watch it.

  6. A great overview of the myths and realities of wage stagnation over the years. Lots of causes but healthcare benefits ate up a lot of gains.

Is Joe Rogan the Future of Media? Let’s Hope So.

Fox News is widely regarded as the biggest game changer in media in the last 20 years. Fox politicized the news and helped spawn the outrage culture that consumes us today. Despite Fox’s dominance and the rise of left-leaning MSNBC in response, something big is happening in alternative media. It can’t come soon enough.

In 2018, an average of 2.4 million people watched Fox News during weeknight prime time. The lineup most evenings peaked at 3.2 million viewers during Sean Hannity’s hour. Both were #1 for cable news.

10 years ago, as Fox was gaining steam, a former B-list actor and comedian started a podcast to interview friends and have freewheeling discussions about current events - serious and otherwise. Today, the Joe Rogan Experience is listened to by over 10 million people each episode. It has been said to peak well over 20 million. These are numbers that rival 60 Minutes. And the podcasting revolution he started has exploded.

Joe Rogan is surely not for everyone. His audience skews male and he often interviews crude comedians and MMA fighters. But, he talks to all sorts whose ideas are relevant and thought-provoking - from physicists to business people to politicians. And his style and approach have created a set of norms for podcasting that is being followed by all sorts of voices. These norms are a welcome change that couldn’t be further from the standards of cable news.

cnn panel.jpg

First off, he dives deep into issues. Just this week, Andrew Yang, the entrepreneur turned Presidential candidate and chief advocate for universal basic income, was on the show - for two and a half hours. No four-minute, four-paneled yelling head segments. Two plus hours of real conversation and deep probing of the topics at hand - jobs, training and worker displacement. That is actually a short segment for Rogan. And it was interesting all the way through.

Second, he is genuinely curious. He wants to learn and brings little ego or arrogance to the conversation. His humility is endearing and opens guests up. He is not afraid of dumb questions because he is unashamed of his own ignorance and views himself as a regular person trying to figure things out.

Third, he is genuinely open to changing his mind. The left criticizes Rogan for talking to fringe figures like Alex Jones, but his views are clearly left of center. He is just no ideologue. His outlook is practical and fully aware that we live in a massively complex world where change is happening at such a pace that any opinion must be loosely held.

Finally, he takes his job seriously but has fun. He was recently criticized for going too easy on Jack Dorsey. He agreed - and said he could do better. But, he was mostly disappointed because the interview was boring. He wants to hold his audience for 3 hours - an almost impossible task in our low attention culture. He cusses too much and drinks with his guests. He gets at real issues and you can’t help learning deeply along with him.

Our cable news overlords do it exactly the opposite: rapid-fire outrage, talking heads with the hottest takes, headline level explanations. But anyone trying to dispute the simple story can do it easily by presenting the nuance and complexity behind the rhetoric. This dynamic is what has created the distrust of the media. The problem isn’t fake news, but shallow news.

Remember hearing that Elon Musk smoked pot in an interview? Well, that was on Joe Rogan. You likely heard about it on cable news. Or in the NY Times. Or the Wall St Journal. It was everywhere. But, the press lost the plot. If you listened to the full 3 hours you would know why Elon Musk is so successful and important. He explained the challenges of building a car company, the difficulty of escaping gravity at low cost, the unlikely emergence of flying cars, the threat of AI and tons more. Go listen to it. By the end, it is clear he is one of the most compelling and important people of this century. His deep understanding of his own inventions and the sheer audacity of each of them is just unparalleled.

Then he had one toke of a joint.

elon musk smoking.jpg

That’s all you heard if you just watch cable news. Or read a newspaper. Or surf the web.

Musk went on to say he didn’t like it. Why? It made people (and him) unproductive. Did you read that in the news? There was no time. There was no viewership in hard work and future ideas. But a CEO smoking dope? That’s cable news gold.

But, here’s what’s changing. 20 million people have watched the video on Youtube. 15 million more have listened to it in podcast form. That is massive reach. The power is shifting. People are getting informed and making their own judgments. Joe Rogan is just the start. Kara Swisher, Ezra Klein, Sam Harris and many more who used to write articles and books are consumed with long-form podcasts. They are learning that people want to hear the full story and will take the time to do it (just as they will watch 100 hours of Game of Thrones).

This information shift is massive and will impact public opinion in big ways in the years ahead. If 2016 was the Facebook election, 2020 might just be the podcast election. We will surely be better informed - and better off. Thanks Joe Rogan for starting it all.

Good Reads - end Jan 2019

  1. A profile of the greatest business you’ve never heard of…unless you live in Texas.

  2. Good thoughts from all sides on the 70% marginal tax rate proposed by AOC and others.

  3. Universal basic income supporters think there will be no jobs in the future. My guess is there will be plenty - we just don’t know what they will be. Fastest growing job last year: solar and wind installers.

  4. Russ Roberts walks through the basic logic of why socialism is a bad idea (and has failed whenever tried).

  5. Real talk from Dan Savage on gentrification and traffic. Short story: less zoning, more mass transit. Another good take on the self inflicted NIMBY fueled SF housing crisis.

  6. Electricity is the new oil.

Independents Will Rule 2020...Again.

The 2020 race to take down Trump is officially underway. The early Democratic field is canvassing Iowa trotting out an undifferentiated mix of liberal policies, mostly inspired by the progressive resistance and the provocative (and highly effective) Alexandria Ocasio-Cortez.  

They won’t win. Well, they won’t beat Trump.

If Dems want to retake the White House, they will have to get to the open minded, middle of the road undecideds that put him there. The same way Obama did. And Bush and Bill Clinton before him.  

Yes, we think we live in a Fox and MSNBC nation, but the truth is that the hardened wings can’t be moved and don’t swing elections.  Presidential elections have been decided by narrow margins for decades so the swing voter makes the call. And, every four years, the difference for those undecideds has been finding someone willing to disrupt their own hard core base. The press follows the activists on both sides and Twitter echoes their orthodox views and outrage, but the middle sides with the one most impure.  As proof, 6 million people who voted for Obama switched to Trump.  It is impossible for a Democrat now to see Trump as undermining the hardened GOP, but as a candidate he massively disrupted GOP orthodoxy and was viewed as much more moderate than Hillary.

Poll after poll shows a large and mushy center at our politics. Many of these folks lean to a party but the truth is they are motivated mostly by distaste of the other side.  So, the politician that shows the most leadership taking on the core of their party draws independent appeal. Clinton: the new Democrat.  Bush: the compassionate conservative. Obama: the post-racial uniter of purple America. Trump: the secular anti-globalist. The words they used told the electorate they could lead and push change even inside their own rigid tents.  And the middle looking for a breakout of our decades-long red-blue warfare loves it.

Trump remains a powerful wildcard in this regard despite being much more conservative in office than in campaigning.  Back then, he challenged GOP orthodoxy by fighting free trade, mass immigration and the overreaching foreign policy of the neo-cons.  Since, he signed the crime bill. That’s about it on the moderate side. But, he looks open to dealing for DACA. And he is sticking hard to fighting China despite the GOP free trade hard liners telling him to deal quickly.  

The Dems better not count on his bad character or Mueller to bail them out.  Neither will. Even his core supporters know his style is reckless and unbecoming (only 1/3 viewed him as honest in 2016), but they take the whole package: a rebel pushing new boundaries. My guess is he will push to the center in the coming years and Ann Coulter will get more upset—an important signal to the independents.  If left facing an true progressive, he will be hard to beat.

Who is up for it on the left?  Well, the key question as a candidate is: who are you willing to offend on your own side?  How can you show independence in a way that signals the potential to pull us all together?

Who will challenge the politically correct identity politics that consumes the left?  Who will push for a real education revolution not just speak of more spending? Who will push for an energy explosion built on new tech not just a call for energy conservation and austerity?  Who will develop an optimistic plan for a rapidly changing world not just fight for the return of a world gone by? Who will not just propose new taxes but demand they are spent effectively? Who will fight not just for redistribution but build meaningful plans for the struggling?  

Right now, there is little evidence of any the current Dem field will do it. They all sing from the same playbook: Medicare for all, free college and new major taxes on the rich.

The progressive base assumes Trump will be easy to beat.  I get it (and hope they are right!). But, their purity tests will be their undoing. Being against everything Trump and Republican is a sacred touchstone for the earliest backers and party leaders. And so the current candidates are getting boxed in as they lay out their progressive plans. Could a new entrant like a Beto or a Bloomberg thrive despite their less than sterling progressive credentials? Can someone, anyone, muster a Sister Souljah moment? Without one, I think they are toast.

All signs point to independents looking for reasons not to vote for Trump. But the lessons of the past are clear - winning candidates transcend their parties. Who has the courage to do it?

P.S. A true independent like Howard Schultz does not fit the bill.  Pissing off everyone is no way to get elected. The key is winning the party core while giving the middle reasons for hope.  However, if he gains traction he could force major Democrats to moderate and hence be more competitive long term.